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New Delhi : The Union Budget 2021-22 presented in Parliament on February 1, 2021, by the Union Finance and Corporate Affairs Minister Nirmala Sitharaman seeks to further simplify the Tax Administration, Litigation Management, and ease the compliance of Direct Tax Administration.
In her Budget Speech, the Finance Minister provided relief to senior citizens in filing of income tax returns, reduced time limit for income tax proceedings, announced setting up of the Dispute Resolution Committee, faceless ITAT, relaxation to NRIs, increase in exemption limit from audit and relief for dividend income. She also announced steps to attract foreign investment into infrastructure, relief to affordable housing and rental housing, tax incentives to IFSC, relief to small charitable trusts, and steps for incentivising Start-ups in the country, according to a PIB release. Sitharaman said that post-pandemic, a new world order seems to be emerging and India will have a leading role therein.
She said that a series of reforms had been introduced by the Government for the benefit of tax payers and economy including slashing of corporate tax rate, abolition of dividend distribution tax, and increasing of rebate for small tax payers. In the year 2020, the income tax return filers saw a dramatic increase to 6.48 crore from 3.31 crore in 2014.
RELIEF TO SENIOR CITIZENS
In the 75th year of independence, the Budget seeks to reduce compliance burden on senior citizens who are of 75 years of age and above. Such senior citizens having only pension and interest income, will be exempted from filing their income tax return. The paying Bank will deduct the necessary tax on their income.
RELAXATION TO NRIs, RELIEF FOR DIVIDEND
The Budget proposes to notify rules for removing the hardship of Non-Resident Indians returning to India on the issue of their accrued incomes in their foreign retirement account. It proposes to make dividend payment to REIT/InvIT exempt from TDS. For Foreign Portfolio Investors, the Budget proposes deduction of tax on dividend income at lower treaty rate. AFFORDABLE HOUSING/ RENTAL HOUSING
The Finance Minister proposed to extend the eligibility period for claim of additional deduction for interest of Rs 1.5 lakh on loan taken for purchase of an affordable house to March 31, 2022. In order to increase the supply of affordable houses, she also announced extension of eligibility period for claiming tax holiday for affordable housing projects by one more year to March 31, 2022. For promoting supply of affordable rental housing for the migrant workers, the Minister announced a new tax exemption for the notified affordable rental housing projects.
TAX BENEFITS FOR START UPS
In order to incentivise start ups in the country, Sitharaman announced extension in the eligibility for claiming tax holiday for startups by one more year till March 31, 2022. In order to incentivise funding of start ups, she proposed extending the Capital Gains exemption for investment in start ups by one more year till March 31, 2022.
TIMELY DEPOSIT OF EMPLOYEES’ CONTRIBUTION TO LABOUR WELFARE FUNDS
The Finance Minister said that delay in deposit of the contribution of employees towards various welfare funds results in permanent loss of interest/income for the employees. In order to ensure timely deposit of employee’s contribution to these funds by the employers, she announced that late deposit of employee’s contribution shall never be allowed as deduction to the employer.
REDUCTION IN TIME FOR REOPENING INCOME TAX PROCEEDINGS
In order to reduce compliance burden, the Budget provides reduction in the time-limit for reopening of income tax proceedings to three years from the present six years. In serious tax evasion cases, where there is evidence of concealment of income of Rs. 50 lakh or more in a year, the assessment can be reopened up to 10 years but only after the approval of the Principal Chief Commissioner.
DISPUTE RESOLUTION COMMITTEE & NATIONAL FACELESS INCOME TAX APPELLATE TRIBUNAL CENTRE
Stating the resolve of the Government to reduce litigation in the taxation system, the Finance Minister said that the Direct Tax ‘Vivad se Vishwas’ Scheme announced by the Government has been received well. Till January 30, 2021, over one lakh ten thousand tax payers have opted to settle tax dispute of over Rs. 85 thousand crores under the Scheme. To further reduce litigation of small tax payers, Sitharaman proposed to constitute a Dispute Resolution Committee. Anyone with a taxable income up to Rs 50 lakh and disputed income up to Rs. 10 lakh, shall be eligible to approach the Committee which will be faceless to ensure efficiency, transparency and accountability. She also announced setting up of National Faceless Income Tax Appellate Tribunal Centre.
TAX AUDIT LIMIT HIKED FOR DIGITAL TRANSACTIONS
To incentivise digital transactions and to reduce the compliance burden of the person who is carrying almost all of their transactions digitally, the Budget proposes to increase the limit for tax audit for persons who are undertaking 95 per cent of their transaction digitally from Rs5 Crore to Rs. 10 Crore.
INCENTIVES FOR FOREIGN INVESTMENTS
To attract foreign investment into infrastructure sector, the Budget proposes to relax certain conditions relating to prohibition on private funding, restriction on commercial activities and direct investment in infrastructure.
RELIEF TO SMALL TRUSTS
In order to reduce compliance burden on the small charitable trusts running educational institutions and hospitals, the Budget proposes to increase the limit on annual receipts for these trusts from present Rs.1 Crore to Rs. 5 Crore for non-applicability of various compliances.